Living Trust and Will Differences

Living trusts and wills are two separate things, and one does not replace the other. Both are important documents to have to ensure that your wishes are carried out in the event of your incapacitation or death. Living trusts are sometimes included with wills and power of attorney documents. Trusts are essentially boxes for holding assets during and/or after your lifetime, while a will directs where your assets and belongings will be distributed after your passing.

Important Differences:

* The Effective date: A living trust takes effect while you are alive. A will takes effect after you pass.

* Providing Direction before Death: Living trusts can make management of an estate during an incapacitation easier than power of attorneys alone. If an asset is in a trust, financial institutions such as banks must recognize your successor trustees during an incapacitation. Institutions are not required to accept powers of attorneys.

* Privacy: Wills are made public during the probate process. Living trusts are private documents and in many states are not recorded.

* Probate: Assets with listed beneficiaries (life insurance, IRA's, beneficiary deeds, etc) and assets in a living trust avoid probate. Probate is a court process to validate a will and ensure its instructions are followed during the transition of an estate. Probate's cost and length differ in each state.

* Provisions for Care of Children: Wills name guardians for children while living trusts do not, however, trusts can appoint someone different than the guardian to manage a beneficiary's assets until they are older and fiscally responsible.

* Contesting: If someone contests the estate, living trusts are often better equipped to handle the contest.

* Taxes: Living trusts can minimize estate taxes for married couples by doubling estate tax exemptions. A will by itself can not double exemptions.

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